Higher gasoline and mortgage interest costs helped to boost the annual inflation rate to 2.5% in November, Statistics Canada reported today.

That’s up from 2.4% in October and slightly higher than what economists were expecting.

But the core inflation rate — which excludes the most volatile elements of the consumer price index — rose only 1.6%, posting its slowest 12-month increase since April 2006.

The core index has decelerated since July 2007. The 12-month change was 2.2% in August, 2% in September and 1.8% in October.

On a year-over-year basis, gasoline prices were 17.6% higher. StatsCan’s mortgage interest cost index also rose by 7% as mortgages were renewed at higher rates and housing prices increased.

Lower car prices helped to hold down the inflation rate. New vehicle prices were 3.9% cheaper than they were a year ago as the high Canadian dollar prompted dealers to chop prices on their 2008 models.

“This was the largest 12-month decrease on record,” StatsCan said.

Among the provinces, Alberta continued to have the highest inflation rate, at 4.7%. Saskatchewan came in second, at 4%. Those two provinces were the only ones where home ownership costs trumped rising gasoline prices as the biggest drivers of inflation.

Between October and November, the CPI rose by a bigger-than-expected 0.3% — mainly because of higher gas prices and rising mortgage interest costs. Core prices, on the other hand, were unchanged from the previous month.

“The continued moderation in core CPI leaves the door wide open for further rates cuts in the new year, if the Bank of Canada decides financial conditions or the growth outlook warrant such help,” BMO Capital Markets senior economist Doug Porter said in a morning commentary.